HLL has reported a flat sales growth in 3QFY01 and a 16% increase in profits. The results of the company are below expectations due to reduced volumes in low price portfolio as a result of intense competition and general market slowdown.
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The operating margins of the company however, improved because of material cost savings, material cost reductions and overall supply chain savings. Further tax savings on accounts of exports contributed in pushing the bottomline growth. HLL's strong export growth of 18% was led by home & personal care, beverages and marine products business.
In personal wash segment overall volumes declined due to loss of 2% market share in the low price segment. Also tea sales declined by 10% due to reduced volumes in low price portfolio and fall in commodity prices. On the other hand fabric care, oral care and skin care registered a marginal growth of 7%, 2% and 4% respectively. HLL's deodorant business grew by 30% due to frequent new launches in the market and household care business witnessed a rise of 10%. The company's food business has shown a remarkable growth rate. Volumes in branded staples grew by 20% and culinary products by 27%.
At the current market price of Rs 185, HLL is trading at 35 times its 9 months FY01 annualised earnings. Concerns about its slowing topline growth has adversely affected the company's stock price which is trading near to its 52 week low. The company's market cap to sales ratio of 3.8 times is below than its historic 5-6 times. The future premium valuations of the company depends on its ability to maintain its performance which again is related to economic growth rate. The company is striving hard to regain its market share in personal care, skin care and tea business. The initiatives taken by HLL could lead to better growth in fourth quarter of FY01.
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